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The Costs of Babylon—Linguistic Distance in Applied Economics

  • Ingo Eduard Isphording
  • Sebastian Otten

Linguistic distance, i.e. the dissimilarity between languages, is an important factor influencing international economic transactions such as migration or international trade flows by imposing hurdles for second language acquisition and increasing transaction costs. To measure these costs, we suggest to use a new measure of linguistic distance. The Levenshtein distance is an easily computed and transparent approach of including linguistic distance into econometric applications. We show its merits in two different applications. First, the effect of linguistic distance in the language acquisition of immigrants is analyzed using data from the 2000 U.S. Census, the German Socio-Economic Panel, and the National Immigrant Survey of Spain. Across countries, linguistic distance is negatively correlated with reported language skills of immigrants. Second, applying a gravity model to data on international trade flows covering 178 countries and 52 years, it is shown that linguistic distance has a strong negative influence on bilateral trade volumes.

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Article provided by Wiley Blackwell in its journal Review of International Economics.

Volume (Year): 21 (2013)
Issue (Month): 2 (05)
Pages: 354-369

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Handle: RePEc:bla:reviec:v:21:y:2013:i:2:p:354-369
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  1. repec:hal:journl:halshs-00641280 is not listed on IDEAS
  2. Melitz, Jacques, 2008. "Language and foreign trade," European Economic Review, Elsevier, vol. 52(4), pages 667-699, May.
  3. Felbermayr, Gabriel & Toubal, Farid, 2010. "Cultural proximity and trade," Munich Reprints in Economics 20351, University of Munich, Department of Economics.
  4. Cristina Fernández & Carolina Ortega, 2008. "Labor market assimilation of immigrants in Spain: employment at the expense of bad job-matches?," Spanish Economic Review, Springer, vol. 10(2), pages 83-107, June.
  5. Chiswick, Barry R. & Miller, Paul W., 2004. "Linguistic Distance: A Quantitative Measure of the Distance Between English and Other Languages," IZA Discussion Papers 1246, Institute for the Study of Labor (IZA).
  6. Gil S. Epstein & Ira N. Gang, 2010. "Migration and Culture," Development Working Papers 304, Centro Studi Luca d\'Agliano, University of Milano.
  7. Ingo E. Isphording & Sebastian Otten, 2011. "Linguistic Distance and the Language Fluency of Immigrants," Ruhr Economic Papers 0274, Rheinisch-Westfälisches Institut für Wirtschaftsforschung, Ruhr-Universität Bochum, Universität Dortmund, Universität Duisburg-Essen.
  8. Ku, Hyejin & Zussman, Asaf, 2010. "Lingua franca: The role of English in international trade," Journal of Economic Behavior & Organization, Elsevier, vol. 75(2), pages 250-260, August.
  9. Alicia Adsera & Mariola Pytlikova, 2012. "The role of language in shaping international migration," Norface Discussion Paper Series 2012014, Norface Research Programme on Migration, Department of Economics, University College London.
  10. Chiswick, Barry R & Miller, Paul W, 1995. "The Endogeneity between Language and Earnings: International Analyses," Journal of Labor Economics, University of Chicago Press, vol. 13(2), pages 246-88, April.
  11. Gabriel Felbermayr & Farid Toubal, 2010. "Cultural Proximity and Trade," Université Paris1 Panthéon-Sorbonne (Post-Print and Working Papers) halshs-00641280, HAL.
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